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On the Contribution of Multi-factors to Hedge Fund Returns

Author

Listed:
  • Dimitrios Koutmos
  • Gregory Koutmos

Abstract

This study evaluates the contribution of multi-factors to the returns of hedge fund indices, across several investment styles. The asset pricing models considered are the market factor model and the five factor Fama and French model augmented with the momentum factor. Based on monthly returns for 13 hedge fund indices representing different investment styles from January 1994 to January 2024, our empirical results show that major return contributions come from the market risk factor as well as the alpha factor. The effect of multi-factors, such as size, value, momentum, profitability, and investment, is minimal in terms of both their impact on the variance as well as the expected return of hedge fund indices. The multi-factors manage to marginally reduce the average contribution of the alpha return factor, whereas the contribution of the market factor is unaffected by the inclusion of additional factors. JEL classification numbers: G12, G17, G20.

Suggested Citation

  • Dimitrios Koutmos & Gregory Koutmos, 2026. "On the Contribution of Multi-factors to Hedge Fund Returns," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 16(5), pages 1-1.
    • Handle: RePEc:spt:apfiba:v:16:y:2026:i:5:f:16_5_1
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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